Restart of Metinvest’s largest local iron ore consumer delayed

Обзоры по компаниям и отраслям 12.05.2015 The production facilities of Alchevsk Steel (ALMK UK), one of the largest consumers of Metinvest’s (METINV) iron ore in Ukraine, were shelled in early May, Metal Courier reported on May 9. For that reason, the steel and iron plant has to delay its scheduled relaunch of its pig iron producing capacities, halted since August 2014. The bombardments cut two out of three electricity lines to the production plant and their repair could be finished during the second half of May. Before the recent destruction, Alchevsk Steel expected to restart two blast furnaces in May and reach 6.2 kt per day of hot iron production (the equivalent of 2.2 mmt annually), before commissioning its steel-making facilities. Alchevsk Steel is part of the Industrial Union of Donbas (IUD) group of companies. It produced 3.8 mmt of hot iron in 2013, consuming around 6.1 mmt of iron ore products, we estimate, the bulk of which was supplied by Metinvest. Total supplies of iron ore products by Metinvest to third parties amounted to 21.9 mmt in 2013. Roman Topolyuk: As we expected, the announced restart of Alchevsk Steel in May – which would have clearly benefitted Metinvest – was easier to announce than fulfill. If our ongoing skepticism proves wrong, and the enterprise does restart its pig iron facilities in June-July 2015, sourcing around 1.1 mmt of iron ore products from Metinvest by the year end, this could add up to USD 30 mln to Metinvest’s 2015 EBITDA, on the top of our current projection of USD 1.65 bln. In this case, Metinvest could increase production of iron ore products and redirect some export sales back towards the local market, where higher profitability could be generated.